Southwestern Public Service Company Files Electric Rate Case Seeking $88 Million Increase

Strategic Insights -

Southwestern Public Service Company, a wholly owned subsidiary of Xcel Energy Inc., has filed an electric rate case with the New Mexico Public Regulation Commission (NMPRC) seeking an increase in base rates of approximately $88 million. The net rate increase to New Mexico customers is expected to be approximately $48 million, or 10%, due to offsetting fuel cost reductions and production tax credits (PTCs) from the Sagamore wind project. The rate request is primarily driven by additional capital investment in new and upgraded electric facilities and equipment since the previous rate case in 2019.

Key Takeaways:

  • The rate case filed by Southwestern Public Service Company seeks a base rate increase of approximately $88 million, which would translate to a net rate increase of $48 million for New Mexico customers, or 10% of their current rates.
  • The rate increase is driven by $38 million in investment in the Sagamore wind project, $40 million in other plant investment, $9 million in allocator changes due to load growth, and $3 million in depreciation rate changes.
  • The PTCs from the Sagamore wind project will offset $40 million of the fuel cost reductions and be credited to customers through the fuel clause.
  • The New Mexico Public Regulation Commission (NMPRC) is expected to suspend rates for nine months beyond the 30-day notice period, pending review, and make a decision and implement final rates in the fourth quarter of 2021.
  • The rate increase is intended to cover additional capital investment in electric facilities and equipment, including the Sagamore wind project, which began commercial operations on time in December 2020.
  • Xcel Energy Inc. and its subsidiaries face various risks and uncertainties, including the impacts and duration of the COVID-19 pandemic, operational safety, commodity risks, and regulatory changes.
  • The request is based on a historic test year ended Sept. 30, 2020, and includes expected capital additions through Feb. 28, 2021, a return on equity of 10.35%, an equity ratio of 54.72% (based on actual capital structure), and a retail rate base of approximately $1.9 billion (total company rate base of approximately $6.0 billion).
  • The Tolk power plant's service life has been reduced to 2032, and the coal handling assets at the Harrington facility will be depreciated over 2024, resulting in a decrease in the rate base.

Statistics:

  • Proposed base rate increase: $88 million
  • Expected net rate increase: $48 million (10% of current rates)
  • Rate increase due to Sagamore wind project investment: $38 million
  • Rate increase due to other plant investment: $40 million
  • Rate increase due to allocator changes: $9 million
  • Rate increase due to depreciation rate changes: $3 million
  • Fuel cost reductions and PTCs: -$40 million
  • Retail rate base: approximately $1.9 billion
  • Total company rate base: approximately $6.0 billion

Sources:

  • FORM 8-K (Current Report) with Securities and Exchange Commission on Jan 04, 2021
  • New Mexico Public Regulation Commission (NMPRC)
  • Xcel Energy Inc. Annual Report on Form 10-K for the year ended Dec. 31, 2019, and subsequent filings with the Securities and Exchange Commission